Eastern Europe and the Southern Caucasus have been hard hit by the economic crisis and the region is to suffer the slowest recovery in the world, an OECD report published yesterday showed.

“The economic crisis, the second economic shock to hit the EESC region after the collapse of the Soviet Union, has been a warning and a call to action,” the Organisation for Economic Cooperation and Development project coordinator Colm Foy said during a press conference in Bucharest.

Based on World Bank and International Monetary Fund analyses, the authors of the report stress that “the EESC countries will face challenges to regain pre-crisis growth rates.”

But although some of these countries have squandered the opportunities that came with the boom years of the 2000s, they have potential to recover, provided they take short and long-term measures such as opening up new markets for the region’s goods and diversifying production.

“While the world market was booming, everything was fine, but when the market crashed, everything was worse here,” Mr Foy said.

Among the vulnerabilities facing the five countries analysed in the report (Armenia, Azerbaijan, Georgia, Moldova and Ukraine), Foy mentioned their reliance on the export of just one or two items, such as steel and grains in the case of Ukraine.

Other issues that should be tackled include the import of expensive products which could be made locally at lower costs, a flourishing informal economy and the disparities between rural and urban areas due to deficient infrastructures.

The report also calls on the region to stem the migration of the workforce, stressing the risks for a country becoming dependent on remittances from the diaspora.

Citing the example of Moldova, where about one third of the population has emigrated, while remittances stand for 30 per cent of gross domestic product, Foy said the money goes to consumption and construction, but not to investment.

“When the remittances stop, the economy stops,” he warned.